Cash Budget for two months is as below - | |||
Particulars | January | February | |
Opening cash balance | $46,000.00 | $24,000.00 | |
Add - | Collection from Customers | $71,000.00 | $146,000.00 |
Less - | Payments to Suppliers | $40,000.00 | $75,000.00 |
Less- | Wages | $30,000.00 | $40,000.00 |
Less- |
Administrative expenses (excluding Depreciation -refer note 1) |
$20,000.00 | $23,000.00 |
Less- | Selling expenses | $15,000.00 | $20,000.00 |
Add - | Sale of short term investment in January | $12,000.00 | $0.00 |
Cash balance at the end of the Month before borrowing loan | $24,000.00 | $12,000.00 | |
Add- | Loan borrowed from local bank | $0.00 | $8,000.00 |
Cash balance at the end of the Month after borrowing loan | $24,000.00 | $20,000.00 | |
Note 1- | Administrative expenses include depreciation of $1,000 which is non cash item and it will not effect cash budget & hence excluded. | ||
Note 2- | In the end of January, cash balance is $24,000 as computed which is more than the minimum monthly cash balance required of $20,000. So there is no need to borrow loan from local bank. | ||
Note 3- | Opening balance of February is the closing balance of January. | ||
Note 4- | Loan required to be borrowed in the month of February as the closing balance is less than minimum monthly requirement. | ||
E7.17 (LO 4), AP Rigley Company expects to have a cash balance of $46,000 on January...
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